Title Agents Remain Vital Piece of Real Estate Transaction
|April 21, 2011|
The future role of the title agent was one of several issues debated at ALTA’s Business Strategies Conference last year. This year, several sessions will focus on tactics to help title agents compete in the changing market. Click here for more information on the conference sessions.
While the role title agents play in facilitating the real estate transaction may change, agents will nonetheless remain an integral part in getting deals closed, several industry professionals predict.
Frank Pellegrini, president of Prairie Title in Illinois, said he expects smaller to mid-size agents to focus on segmentation to remain competitive.
“They will need to focus on their strengths and a certain segment of the market, whether it is geographical or certain professional lines,” he said.
Cara Detring, president of Missouri-based Preferred Land Title Co., suggested agents need to decipher how they will posture themselves to provide needed services. This may require altering the business model.
“It may be augmenting your services for an underwriter or it may be some other way of performing some piece of a core title service for someone else that allows you to make money,” she said. “The technology piece on a small office is tough because that comes with a lot of burden.”
Agents may need to collaborate with others in order to get products to clients, Detring added.
“There will be a lot of soul searching, and we will see a lot of agents fail within the next five years,” she said.
Rob Chapman, senior vice president and chief information officer for Old Republic Title Insurance Co., said agents will remain relevant because of supply-chain management and because underwriters can’t afford to saturate the market with direct operations.
“It’s a very simple fact that underwriters can’t penetrate every market,” he said. “The need for agents will never change because the relationship is local. The need for a small agent will only increase, not decrease.”
Technology will enable small agents to have a very viable role, according to Chapman, and small agents will have to look at technologies to right-size their business.
“Technology is an amazing thing if all parties are cooperative. It doesn’t matter the size of the entity. The availability to find economies of scale is there,” he said.
Pat Stone, chief executive officer of Oregon-based Williston Financial Group, the parent company of WFG Title Insurance Co., said that in five years we will see the emergence of a property and casualty model for the title insurance industry where the small agent monetizes the relationships while title production and the underwriting is handled by the underwriter.
Stone isn’t saying title agents will start selling P&C products; rather they may begin following the P&C model where an agent represents the insurance company and monetizes the relationship within the local community, while the underwriting is done by the insurance company in the background.
“Ultimately, the small agent has a better economic future in that model than trying to keep production themselves,” Stone said. “I’m not advocating it, but the model has to change. Unless you have scale, how do you keep your costs down? Unless you keep your costs down, how do you survive? For larger agents with scale, if you can outsource some work and keep some work, those agents can maintain the model.”
Doug Bello, president of D. Bello Associates in California, agreed that smaller agents oftentimes don’t have the luxury of cutting costs or staff to compete with the larger agents or underwriter direct operations.
“Small agents sometimes don’t fit into the outsourcing arena because they don’t have the volume to make it worthwhile,” he said. “That, sometimes, puts them at a cost-competitive disadvantage to the larger companies who might be able to offer a lower price than a smaller agent.”
While smaller operations may lack the ability to leverage scale, there are other options to remain competitive.
While the industry continues to change and the market remains somewhat unpredictable, one thing remains the same, according to Darryl Turner, chief executive officer of the Darryl Turner Corp.
“Title agents can create their own relevance,” he said. “That fact is not subject to opinion, market trends, customer concerns or any other entity of the business because it is a business principle.”
Turner said agents that are serious about staying in business must be focused on remaining relevant with their business model. In order to do that, one must accept a couple of very important principles, according to Turner.
“The customer will continue to find a way to send business where they ‘want’ to,” he said. “I know that with JVs and AfBAs, etc, many people think they are losing their control over their ability to grow and maintain revenue. While this is authentically happening to some degree, one must never let go of the fact that people do business where they want to.”
Based on this, one must ask, “What makes someone want to use our agency?” Without the answer to this question (which is dynamic and may change), one cannot create a proactive plan to create such an environment.
Turner said customers are magnetically attracted to “Visible Value,” which is the value they see in you and your agency through reputation. If an agent’s visible value is that they have historically been known to be the one to supply the bacon and eggs for the monthly all-hands office meeting, then your “Visible Value” is weak, Turner said.
“On the other hand, if your reputation is known by your ability to close deals on time and with no errors, then your ‘visible value’ is average,” he added. “Yes, I said average, simply because this is their minimum expectation.”
If an agent’s reputation is based on the fact that they can not only close deals on time (which is generally the expectation) but can also understand their business model and understand strategic concepts when it comes to suggesting strategies for your customers to increase “their” business and also help them with ways to “leverage” their time, agents will have a “Strong Visible Value.”
“So, if you want to remain relevant, you must accept that the reliance on an old model in a new business era is a sure fire way to fail and fail big,” Turner said. “Look at your model now and make changes fast.”
Turner reminds agents of a formula he offers for growth: E+M=R, which stands for the Economy + Your Model = Your Results. In other words, the way things are filtered through what we consistently do or don’t do will always equal what we get. He said to keep in mind that you can’t change two of those factors. You can’t change the economy and you can’t change your results. Results are actually the “outcome of an action or set of actions.”
“The only thing you can do is constantly and dynamically modify your model, or what you do, to maintain relevance in a marketplace,” Turner said. “The fact is simple. To remain relevant one must change, and that change must be equal to or ahead of the demand for change.”